Oldham, Li & Nie, Solicitors v. Wong Lin Chooi

DCCJ 5076/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5076 OF 2004

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BETWEEN

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Coram : Deputy District Judge K. Lo

Dates of Hearing : 2^nd and 3^rd February 2006

Date of Handing down of Ruling : 13^th February 2006

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Ruling

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Background

1.The Plaintiff issued a Writ of Summons against the Defendant on 24 September 2004 for 2 unpaid invoices in the sum of HK$208,661.  By a Judgement dated 22 April 2005 (“The Judgment”) made by Master J. Ko following an Order 14 application, the Defendant was adjudged to pay to the Plaintiff the sum of HK$208,661 together with interest at judgment rate from 24 September 2004 to the date of payment and costs of this action including costs reserved on 24 January 2005 and 31 January 2005 to be taxed, if not agreed.

2.On 5 May 2005 the Defendant filed a Notice of Appeal against the decision of Master J. Ko which was heard before His Honour Judge Chow on 7 June 2005 and 22 June 2005.  The appeal was dismissed with costs to the Plaintiff.  The Defendant also applied to transfer the proceedings to the Court of First Instance and this application was also dismissed with costs to the Plaintiff.

3.On 29 August 2005 the Defendant made an application for leave to appeal against the decision of His Honour Judge Chow dated 16 August 2005 which was heard on 13 September 2005, the same was dismissed with costs to the Plaintiff.

4.Subsequently, the Defendant obtained leave from the Court of Appeal to appeal the decision made by His Honour Judge Chow dated 16 August 2005 and the appeal has now been set down and was to be heard on 14 February 2006.  However, no order for stay of execution of the Judgment was ever made by any Court.  In fact, Yuen J.A. did remind the Defendant of their right to apply for stay of execution in the District Court which she failed to do. 

5.The Judgment Debt remains wholly unsatisfied up to this hearing.

6.The Plaintiff applied for security for costs under the connecting action CACV-319/2005 and in the course of the proceedings, the Defendant disclosed, by an affirmation of Lau Yuk Kuen filed on 29 October 2005, that she is one of the 2 joint tenants of a property known as Flat D, 25^th floor, Excelsior Court, 83 Robinson Road, Hong Kong (together with car parking space no. 10 on the C5 floor) (“the Robinson Property”).

7.As a result of such disclosure, the Plaintiff made an application for a Charging Order over the Robinson Property and on 17 November 2005, Mr. Registrar Yu granted a Charging Order Nisi and the hearing for the Defendant to show cause was returnable on 19 December 2005 before Master S.T. Poon.  The Defendant opposed the application and the matter was adjourned for argument on 2 February 2006 before me. 

8.Before this Court dealt with the substantive issues argued before me, I had dealt with the Defendant’s adjournment application.

9.The 2 reasons put forward for their adjournment application was that (1) the Plaintiff had sought to rely on incomplete transcript of the hearing before Tang J. in this hearing and the Defendant seeked to make available the full transcript and (2) that the Defendant would like to have her bank statements produced to show that she had previously paid costs on account to the Plaintiff and that the same was not ready yet. 

10.This Court refused the application on the ground that firstly the hearing before Tang J. only related to security for costs application and this Court did not read and would not read the transcript as that was not really materials relevant to the present hearing.  Further, even accepting the point that the Defendant tried to assert, in that the Plaintiff did, in that hearing, allege that although the Defendant was one of the registered owners of the Robinson property, she might not be the owner of beneficial interests in the same.  In the present case, there was no evidence before this Court that the Defendant was not the owner of beneficial interests in the Robinson Property.  In fact the Defendant did not dispute that she had beneficial interests in the Robinson Property.  The Court will safely and readily conclude that the Defendant is the owner of the beneficial interests of the Robinson property. 

11.Coming to the second reason for adjournment, it has been noted that there was never pleaded by the Defendant that she was entitled to a set-off because of some costs on account with the Plaintiff.  It was noted of course that there was correspondence between the parties dating back to mid-2004 about a US$40,000 costs on account.  There was discussion as to whether the same was paid for the account of the ex-husband of the Defendant or the Defendant.  It was said in paragraph 10 of the affirmation of Mr. Oldham of the Plaintiff dated 16 January 2006, that the Defendant had failed to clarify whether the alleged costs on account in the sum of US$40,000 was in fact maintained by the Plaintiff for herself or for her ex-husband, given the contradictory stances put by the Defendant’s solicitors in these proceedings.  He referred to paragraph 4 of the 4^th affirmation of Mrs. Lam’s 4^th affirmation which stated that she was not in a position to confirm whether the Defe`    ndant had maintained any costs on account with the Plaintiff, nor has her firm been able to clarify its stance on this subject by confirming which of its clients claimed to have maintained such costs on account. 

12.No action was taken by the Defendant to recover its costs on account and there was no cross judgment. 

13.Further it was noted by its Court that the grounds of appeal filed in the pending appeal did not include any reference to the costs on accounts issue. 

14.In any event, the bank statements of the bank account of the Defendant, even if produced could at most only show that the Defendant did at some point in the past pay certain sums to the Plaintiff, but was that costs on account for the Defendant or her ex-husband?  Reading the correspondence between the parties, it was clear that the Plaintiff admitted having received some US$40,000 from the Defendant or her ex-husband, the production of the said bank statements could not further assist the Court.  It was also alleged by the Plaintiff way back in 2004 that the Defendant and her ex-husband did have a number of files with the Plaintiff.  Was these monies since been used for set-off of payment of other bills?

15.Furthermore, there was clearly undue delay on the part of the Defendant in applying for these bank statements from Court.  The issue was raised in mid-2004, summary judgment was granted on 22 April 2005 charging order nisi was granted on 17 November 2005, notice to show cause was served on the Plaintiff on 19 November 2005 and the hearing was first heard on 19 December 2005.  This Court was only informed on the date of hearing, from the Counsel table, that the Defendant had applied for these bank statements in January 2006 and that he had sight of this letter.  No affirmation was filed in support nor was the copy application letter produced to Court.

16.For reasons above, this Court exercised its discretion and refused the adjournment application. 

17.Counsel for the Defendant then proceeded to make his submission on why this Court should set aside and not make absolute this charging order nisi. 

18.He submitted that the charging order nisi was obtained before Registrar Yu as the Plaintiff did not make full disclosure to Registrar Yu.  He submitted that the Plaintiff had failed to inform the Court that they had previously said they were uncertain that the Plaintiff had beneficial interests in the Robinson property when they appeared before Tang J.A. in relation to the security for costs application whereas in the application for charging order, they filed an affirmation to the effect that they verily believed the Defendant had beneficial interests in the Robinson property.

19.Secondly, they said their chance in the pending appeal is good because

(1)   they had been granted leave to appeal;

(2)       that Tang J.A. bid them good luck in the appeal;

(3)   that the costs on account was a triable issue and the summary judgment should therefore be set aside.

20.Counsel for the Defendant admitted that there was no application to the District Court for stay of execution though the right to do so had been reminded by Yuen J.A. when granting the leave to appeal. 

21.He further admitted that the Defendant never applied for the invoices in question be taxed.

22.In fact, the Defendant did admit that Master J. Ko did mention to the Plaintiff the possibility of taxation.

23.It was noted by this Court that though the Defendant did in the past ask the Plaintiff to tax the bills, they themselves did not proceed to seek for taxation. 

24.Thirdly Counsel for the Defendant submitted that the Court should not exercise its discretion to make a charging order nisi absolute if there is the problem of over-security.  He quoted the case of Chan Miu Cheung, personal representative of John Gilbert, deceased v. Prague Enterprise Ltd. and others A2200/1985 where Madam Justice Yuen confirmed the principle in the case of Robinson v. Bailey [1942] 1 Ch. 268, 271 where it was said that it was not a proper exercise of discretion to make a charging order on an asset of considerable or substantial value in respect of a relatively small debt payable by the debtor.  

25.Lastly it was submitted that there was a bankruptcy petition filed against the Defendant and therefore the charging order nisi should not be made absolute.  He cited Butterworth Hong Kong Bankruptcy Law Handbook which made reference to the Dak Sing Bank Ltd. v. Raylight Industrial Co. Ltd. & Another [1987] 3 HKC25, on appeal in [1987] 3 HKC 29, and the House of Lords decision in Roberts Petroleum Ltd. v. Bernard Kenny Ltd. (in liquidation) [1983] 1 All ER 564 (HL).

26.Order 50/9A/42 was referred to.  It says that supervening bankruptcy of the judgment debtor may be a ground to discharge a charging order absolute.

27.Section 45 of Bankruptcy Ordinance Cap. 6 was also referred to.  It says that where a creditor has issued execution against the property of a bankrupt or has attached any debt to him, he shall not be entitled to retain the benefit of the execution or attachment against the trustee in bankruptcy of the bankrupt unless he had completed the execution or attachment before the date of the bankruptcy order and before notice of the presentation of any bankruptcy petition by or against the bankrupt.  The execution against land is completed by seizure by the appointment of a receiver or by the making of a charging order under section 20 of the High Court Ordinance. 

28.Section 45 also says that the right conferred by this section on the trustee in relation to executions against the property of the bankrupt and this attachment of debts due to the bankrupt may be set aside by the court in favour of the creditor to such extent and subject to such terms as the Court may think fit.

29.After the Counsel for the Defendant had made the foregoing submissions, he then said his client was willing to make full payment into Court of the whole sum of judgment debt with accrued interests until the payment date within 14 days and further she agrees that the said sum with interests be released to the Plaintiff should the pending appeal be dismissed and released to the Defendant should the pending appeal be allowed.  The same was acceptable to the Plaintiff and a consent order was made in the like terms.

30.The parties could not agree on issue of costs of and incidental to the charging order application and they left the same to be resolved by this Court.

31.Counsel for the Plaintiff asked for costs of and incidental to the charging order.  She said it was the first time that the Defendant offered such payment into Court o the judgment creditor and that had they made such offer before they applied for the charging order, the costs would be saved.

32.She objected to the costs being costs in the cause of the appeal.

33.Counsel for the Defendant asked for costs of and incidental to the charging order be costs in the cause of the appeal.  He said should the appeal be allowed, the Defendant should not have to pay the costs of and incidental to the charging order.

The Law

34.It is settled law that an appeal does not operate as a stay of execution.  If the Defendant wishes to have a stay of execution, she must apply and obtain the stay.  (Order 58 rule 3 of Rules of District Court).

35.S.52A of the District Court Ordinance provides that the Court may impose a charge for securing the payment of any money due or to become due under a judgment or order of the Court on a judgment debtor’s property and that in deciding whether to make a charging order the Court has to consider (1) all the circumstances of the debtor and (2) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order.

36.Section 52AA o the District Court Ordinance says that a charging order may be imposed on an interest held by the judgment debtor beneficially in an asset in land, i.e. a landed property.

37.The general principles governing the exercise of the Court’s discretion to making a Charging Order are:-.

(a)     The question as to whether a charging order nisi should be made absolute is one for the discretion of the Court.

(b)     The burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor.

(c)     For the purpose of the exercise of the Court’s discretion there is, in general, no material difference between the making absolute of a charging order nisi on the other hand, a garnishee order nisi on the other.

(d)     In exercising the discretion, the Court has both the right and the duty to take into account all the circumstances of a particular case, whether such circumstances arose before or after the making of the order nisi.

(e)     The Court should so exercise its discretions to do equity, so far as possible, to all the various parties involved, that is to say, the judgment creditor, the judgment debtor and all other unsecured creditors.

38.A charging order nisi must either be made absolute or discharged unless there is a real issue to be tried as to the ownership of a beneficial interest in the property sought to be charged.

[para 50/9A/23, at P.757 – 759, White Book]

Present Application

39.Summary judgment was granted against the Defendant in April 2005.

40.There was no order on stay of execution on the judgment although the Defendant did lodge an appeal.

41.The appeal was not by itself a bar to execution of the appeal.

42.The Defendant did not apply to the District Court for stay of execution.

43.As a result of the consent order the Plaintiff will be given security for payment of judgment debt and interests.  In effect, the Plaintiff will be paid their judgment debt once the appeal is dismissed.  They will have achieved their purpose of obtaining security for enforcement of their judgment (instead of attaching the judgment debt to the Robinson Property).

44.It follows therefore it can be said that this result could not be achieved had the Plaintiff not taken out the present charging order application.

45.Further, I must say that submission regarding the chance of the Defendant’s appeal resulting from or relating to Tang J.A.’s bidding her luck in the appeal, in my view, has no bearing on her chance in the pending appeal.

46.Further, submission on costs on account by counsel for the Defendant is in fact not included as a ground of appeal in the pending appeal.  In fact, if one reads the correspondence bundle and the affirmation of the witnesses, the Defendant herself is clearly unable to state clearly whether the said US$40,000 was paid on account for services rendered by the Plaintiff to herself or the ex-husband and whether the same had already been offset, in whole or in part, by the Plaintiff for services rendered for her in other files.  The issue of set-off has never been raised.

47.The issue of material non-disclosure in my view does not matter here.  I think in the circumstances, the charging order nisi will still be granted even though it was disclosed that though the Defendant is the one of the registered joint owners of the Robinson Property and that the Plaintiff is unsure if she is the owner of beneficial interests in the same.

48.Coming to the over-security point, the net value of the Defendant in the Robinson property was said to be $4 million and the judgment debt in question was $208,661,00 and interests.

49.The judgment debt does appear to be relatively small compared to the value of beneficial interests of the Defendant in the Robinson Property.

50.Following the principle in the said Chan Miu Cheung case, it seems that this Court should not exercise its discretion and make the charging order nisi absolute.

51.Further, in this case, there was petition for bankruptcy against the Defendant filed by the Plaintiff dated 12^th November 2005 and filed on the 14^th November 2005.  S.45 of the Bankruptcy Ordinance says that creditor shall not be entitled to retain the benefit of execution or attachment against the trustee in bankruptcy of the bankruptcy order unless the execution or the attachment was completed before the bankruptcy order.  The charging order had not been made absolute at date of the hearing.

52.It would seem therefore that in view of the bankruptcy petition, this Court should not exercise its discretion to make the charging order absolute.

53.It was submitted that at time of hearing, there does not seem to be other creditors.

54.This Court noted also that on the Defendant’s admission, she was always outside Hong Kong and according to the Plaintiff, the Robinson Property is the only asset they know of the Defendant.

55.It is also a fact that the judgment debt, granted in April 2005 had not been satisfied. 

56.Counsel for the Defendant submitted that his client is one of means and, leaving aside the Robinson Property, she has other assets to satisfy the judgment debt.  Nothing was said as to what other assets she possessed other than the Robinson Property.

57.It is clear that the Plaintiff has been at pains to have his judgment satisfied since the grant of the summary judgment but in vain.

58.In order that equity prevail, in this case, having regard to all circumstances of the case, had the case proceeded without the consent order, I would have more likely than not, order that the charging order nisi to be discharged only on payment of the full judgment debt and interests and costs be to the Plaintiff.

59.In the present case, it is clear that the Plaintiff would not have obtained this security of payment into court had they not taken out the charging order application.

60.I find it appropriate to exercise my discretion and order that costs of and incidental to the charging order be to the Plaintiff, taxed if not agreed.

61.There is nothing to prevent the Defendant, in the event that they succeed in the pending appeal to recover costs of the charging order application from the Plaintiff.

62.Had the Defendant offered to make payment into Court earlier, say before the Plaintiff applied for charging order or even soonest after charging order nisi was granted, the costs order will probably be different.